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The draft analysis, which is subject to public comment, examined the revised route TransCanada proposed after President Barack Obama blocked an original path

This March 2012 file photo shows President Barack Obama arriving at the TransCanada Stillwater Pipe Yard in Cushing, Okla. Embarking on a second term, Obama faces mounting pressure on a decision he had put off during his re-election campaign: whether to approve the $7 billion proposed Keystone XL oil pipeline between the U.S. and Canada.

Photograph by: Pablo Martinez Monsivais
, AP

A long-awaited assessment of TransCanada Corp.'s Keystone XL pipeline by the U.S. State Department made no specific recommendation on the project, cheering oil companies and outraging environmentalists who said it underestimated the project's impact on climate change.

The draft analysis, which is subject to public comment, examined the revised route TransCanada proposed after President Barack Obama blocked an original path amid concerns it posed a threat to an aquifer in Nebraska.

The State Department report doesn't make a recommendation on whether the pipeline should be approved or denied. It instead points to ways in which the pipeline could harm the environment, though supporters said none should derail the project. Administration officials stressed the analysis was a work in progress.

"We're looking for feedback now from the public to help us shape this going forward," Kerri-Ann Jones, State's assistant secretary for oceans and international environmental and scientific affairs, told reporters today on a conference call. After 45 days for public comment, and additional time for federal agencies to weigh in, a final decision may be made in late September.

Environmental groups said they were "outraged" by the analysis because it found the pipeline would have little impact on greenhouse-gas emissions.

"President Obama needs to match his soaring oratory with climate action, and the State Department just made that harder," Michael Brune, executive director of the Sierra Club, a San Francisco-based environmental group, said on a conference call. "We don't think there is any sign that the White House has put its fingerprints on this analysis. We do think it's made the president's job more difficult."

TransCanada fell 0.5 percent to C$47.81 at 4:30 p.m. in Toronto. The shares have climbed 7.4 percent so far this year.

The draft report is "an important step towards receiving a presidential permit for this critical energy infrastructure project," TransCanada Chief Executive Office Russ Girling said in a statement.

Environmentalists say the pipeline, which will cross six U.S. states, will exacerbate climate-change risks by promoting mining of Alberta's oil sands, which release more carbon dioxide than conventional drilling.

The analysis said that while oil sands mining releases more of the gases linked by scientists to global warming, rejecting the pipeline won't reduce the rate of development in the oil sands or the amount of heavy crude refined in the U.S.

If both Keystone and the other proposed pipelines from the tar sands aren't built, the reduction in annual emissions would be at most 5.3 million metric tons a year of carbon dioxide, less than 0.1 percent of total U.S. emissions, the department's anaylsis found.

Oil and gas producers say the project proposed by Calgary- based TransCanada will create thousands of jobs and boost U.S. energy security.

Oil lobbyists welcomed the report and analysts said it signaled administration approval of a project that has become a flashpoint between environmental protection and economic development.

"No matter how many times KXL is reviewed, the result is the same: no significant environmental impact," said Marty Durbin, executive vice president for the American Petroleum Institute, a Washington-based group whose members include Exxon Mobil Corp. "The latest impact statement from the State Department puts this important, job-creating project one step closer to reality."

Bill Day, a San Antonio-based spokesman for Valero Energy Corp., the world's largest independent refinery by capacity, said after the analysis that the pipeline would be approved.

"Nothing that has come out in this report or any of the others would be reason for even this delay, let alone a denial," Day said in an interview.

A final decision won't come until after agencies including the Environmental Protection Agency get to comment. The EPA found a previous draft environmental analysis for the original Keystone route was "unduly narrow."

John Kilduff, a partner at Again Capital LLC, a New York- based hedge fund that focuses on energy, said the finding the project won't significantly impact oil sands development signals approval.

'Roadmap Forward'

"It's still a long way away, but at least there's a roadmap forward," Kilduff said.

The department found that without the Keystone XL pipeline, alternative modes of transporting Canadian crude would emerge.

One scenario assumes the construction of new rail loading terminals in Lloydminster, Saskatchewan, and Epping, North Dakota, that would carry oil on existing rail lines to new rail terminals in Stroud, Oklahoma.

Another option would see oil taken by rail to Port Rupert, British Columbia, loaded onto tankers shipped down the Pacific Coast, through the Panama Canal, and up through the Gulf of Mexico.

Environmentalists said Keystone was critical to the development of Alberta's oil sands.

"They call it Keystone for a reason," Bill McKibbon, who heads 350.org, which has been leading the opposition to the pipeline, told reporters. "If they don't have it, they aren't going to be able to develop the tar sands."

This March 2012 file photo shows President Barack Obama arriving at the TransCanada Stillwater Pipe Yard in Cushing, Okla. Embarking on a second term, Obama faces mounting pressure on a decision he had put off during his re-election campaign: whether to approve the $7 billion proposed Keystone XL oil pipeline between the U.S. and Canada.

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